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Case Study on Using AI in Workers’ Comp

Australia is home to a well-developed workers’ compensation system. Each state determines the design of its scheme, with some being privately underwritten by insurers and others being state-run. Claims across territories vary by industry, injury and complexity. As such, insurers need systems that can enable quality, efficient handling of claims to facilitate the health of injured parties and can get them back to work as quickly as possible.

Approximately three years ago, QBE’s Australia Pacific division, like many other insurers, was running what we would describe as a “process-compliant business” when it came to workers’ comp claims. Leadership wanted to do more to eliminate manual processes and take advantage of claims adjusters’ expertise to get the best result for customers and their employees. They knew technology was the key.

Three Core Issues

QBE had long valued the principle of getting the right claim to the right adjuster based on areas of expertise. But to spot complexities early, claims teams engaged in what I refer to as our manual triage system. Expert adjusters did a cursory look at claims as soon as they were lodged, to identify potential risks based on very simple criteria — in particular, was the employee missing work? Simply put, we needed a better way to get claims routed and assessed from the earliest stages.

Our leadership team also wanted to figure out how to lighten adjuster caseload. As is common across the industry, adjusters may handle as many as 70 to 80 claims at a time. With this volume, it was incredibly difficult to spot the more complex or problematic claims, the ones that require the most attention. QBE was seeking a tool that could surface this information quickly and easily.

Additionally, the team was committed to identifying a better way to conduct quality reviews. Instead of manually selecting which claims to examine, which is very time-consuming, we wanted to add artificial intelligence to the mix.

AI Intrigue

As QBE prepared to set its strategic initiatives for the next few years, data analytics was prioritized. With more detailed information, adjusters and leadership could make better decisions about how to route claims, what required attention and how to ensure efficient, positive resolution.

We considered building a solution in-house but quickly realized that it would take a considerable amount of time and staff resources to construct a system that mapped to our priorities. We started engaging with many of the big data and analytics consultancies, hopeful that they would be able to help. They didn’t fit the bill, either.

See also: COVID-19’s Impact on Delivery of Care

In the summer of 2017, I ran across an article about how CLARA Analytics applied machine learning to workers’ comp claims. The approach, which leveraged artificial intelligence (AI) to identify claim issues and keep them from escalating while helping to close simple claims faster, made sense. As I examined how the models worked and how the software visualizes workload allocation, I recognized that it was the way we wanted to run our business and that CLARA had a sizeable lead over what QBE could build internally.

Clear Benefits

Once we started to get past people’s reluctance to use AI, they began to understand how an AI system could make their jobs easier — the models not only saved countless hours of manual work but their accuracy made decision-making significantly easier.

The financial benefits associated with an adoption of such software have been significant. The initial reports estimate that product integration will easily deliver a 5:1 return on investment, and that could turn out to be conservative, given that the savings will extend across QBE’s entire workers’ comp portfolio.

QBE has been able to implement a more focused approach to quality assurance. Gone are the random selections of claims. Instead, we take the lead from this new system, which provides a much higher level of confidence that the review team is looking into the claims that need it most.

We believe that quality assurance shouldn’t be driven by art; it should be driven by analytics, which is exactly what we’ve been able to accomplish.

In addition to the new-found efficiencies and claim insights, we have enjoyed the competitive differentiation provided to our sales team. They love being able to showcase how QBE uses industry-leading technology to improve claims operations at multiple levels.

See also: An AI Road Map to the Future of Insurance

Continuing Collaboration

Our partnership has allowed us to enhance the software’s capabilities to create significant advancements for our industry. For example, several months ago, both QBE and CLARA started collecting perception data from each injured person’s claim, such as how they feel about their recovery. Today, we are able to collect and analyze that information at scale.

People have been talking about psychosocial flags for injury recovery for more than 20 years, and no one has solved the problem. But taking in extra data points and using them in a different way or thinking about a problem from another perspective has let us make better decisions about how to route claims, what required attention and how to ensure an efficient, positive resolution.

COVID-19’s Impact on Delivery of Care

Two forces have emerged that will reshape the workers’ comp system for years to come. The first is the COVID-19 pandemic, which has created sudden and deep shifts to personal health practices and healthcare delivery. To reduce COVID-19’s impact, much of the U.S. population is avoiding public spaces and travel, causing enormous disruption across a range of industries, from airlines to hospitality. This change has ignited a global recession.

Together, COVID-19 and the accompanying recession are driving changes across property and casualty insurance lines, including workers’ compensation, causing carriers, reinsurers and third-party administrators to rethink long-held assumptions. Companies hoping to navigate all of this need to anticipate and prepare.

To help, we held a Q&A session with some of the smartest people in the business who sit on our advisory panel. Special thanks go to Dan Rufenacht, QBE North America; Will LaChapelle, QBE North America; David Bacon, QBE Insurance; Kevin Bingham, Chesapeake Employers’ Insurance; and Jim Kinzie, QBE Insurance. Below is a summary of responses outlining the most fundamental changes to plan for. Let us know what you think — and what your team and company are doing to adjust to this new and dynamic environment.

What are the major changes we should anticipate in workers’ compensation claims due to COVID-19?

The experts on our panel highlighted several ways that workers’ comp claims will change, many of which are related to shifts in volume and type of claim. For example, the total number of claims is likely to go down as unemployment increases. There are fewer people in the workforce, which will lead to fewer claims overall, particularly as work involving manual labor slows.

Although the volume of typical workers’ comp claims will decrease, claims for different types of injuries could escalate. There will almost certainly be an increase in occupational disease claims from workers on the front line of fighting COVID-19 (e.g., police, fire, healthcare workers.). There is emerging pressure in some states and regions/provinces to extend coverage for workers being asked by employers to extend services or responsibilities for essential businesses. There is also the potential for new ergonomic claims and other types of accidents as people adjust from working in an office to working from their bed or couch and sitting for prolonged periods. Additionally, there is a risk for the select businesses hiring new workers — there could be an increase in frequency and severity of claims if workers are inexperienced or can’t be properly trained based on conditions. On top of this, there may be some spikes in preventable accidents, resulting in new claims, if safety service visits have been canceled due to COVID-19, leaving potentially dangerous areas exposed.

Organizations should also expect to see several changes in treatment patterns emerge, as care delivery will undoubtedly be affected under the strain that COVID-19 places on healthcare systems. Most non-essential surgeries, physical therapy sessions and scheduled doctor visits are tabled for the foreseeable future. This will delay the path to health for injured workers and delay the resolution of many claims. However, telemedicine and tele-rehab solutions are being implemented in an attempt to mitigate the effects of delayed treatment. The key here with telehealth options will be ensuring that access to and the effectiveness of care delivered to injured workers remains similar to, if not greater than, the same care provided in-person with the treating doctor or therapist.

See also: Business Continuity During COVID-19  

The shift to telemedicine and tele-rehab is an example of how present stresses are opening the doors for innovations. Telehealth options and digital resistance that insurers and the larger healthcare community have been fighting over for years have suddenly become possible within the course of only a week because they are necessity-driven. At least one panelist welcomed the opportunity, adding that “the old rules of ‘we can’t direct treatment’ are ripe for breaking just now.”

How are claims teams gearing up to handle these changes? Are there parallels that come to mind?

To prepare, claims teams are keeping a close eye on the new claims coming in — the type and volume — to ensure proper resourcing and reporting. New organization structures are also being considered. For example, some organizations are considering bringing some of the claims processing that previously had been outsourced to places like India and the Philippines back in-house — and possibly permanently. The benefit of this move is to open new jobs at home, which can offer good flexibility as employees work remotely.

Also, based on behavior in past crises, the panel noted that claimants are under a lot of additional stress; therefore, it is imperative that claims teams show empathy and compassion. We are all trying to navigate an unprecedented situation, and people are doing the best that they can.

Any impact on other types of claims due to the stresses on the healthcare environment?

Panelists instantly noted how much pressure first responders are under. These workers are covered in many states under presumption laws, which can include PTSD. If so, according to our experts, there will likely be an increase in claims from first responders soon.

Any advice for claims professionals?

Panelists offered several thoughts, including:

  • Remember to stick to the basics: Conduct quality and complete investigations and thoughtful compensability evaluations. Use common sense and empathy and talk to peers and managers to manage stress and determine the best ways to help claimants.
  • Look for opportunities and new or different treatments and delivery channels that can provide relief in lieu of surgery, as almost all non-emergency surgeries have been postponed or canceled.
  • Watch how other lines indirectly and directly affect workers’ comp. For example, health insurers will be inundated with all kinds of pre-hospital, hospital and post-hospital expenses. If they can get workers’ comp to pay for these costs, it may become more important to them.

See also: Chaos in a Post-Yesterday World!  

With things evolving on a daily basis, how do we keep abreast of all the changes going on? Are there any specific resources you use?

Our experts rely on several proven and reliable industry blogs, association websites, attorney newsletters, state bulletins and other alerts to stay on top of the industry — in addition to daily news broadcasts and updates. Some listen to podcasts, as well. Sources include general business and technology, in addition to verticals.

To help, we compiled a list of some of the most useful industry-specific content mentioned:

I would like to extend my great thanks to all of our advisory panel members for sharing their insights in this turbulent time.

And the Winner Is…Artificial Intelligence!

Artificial intelligence stands out as one of the hottest technologies in the insurance industry in 2018. We are seeing more insurers identifying use cases, partnering and investing in AI. 85% of insurers are investing time, money and effort into exploring the AI family of technologies. The focus is not so much on the technology itself as on the business challenges AI is addressing.

  • For companies looking to improve internal efficiency, AI can assist through machine learning.
  • For those working to create a dynamic and collaborative customer experience, AI can assist with natural language processing and chatbots.
  • For those seeking an edge in data and analytics, AI can help to gain insights from images with the help of machine learning.

Through our annual SMA Innovation in Action Awards program, we hear many success stories from insurers throughout the industry that are innovating for advantage. AI was a key technology among this year’s submissions. The near-ubiquity of AI was even more obvious among this year’s insurer and solution provider winners, many of whom are leveraging some type of AI to solve widely variant business problems. They have provided some excellent use cases of how insurers are applying AI and how it is helping them to succeed.

Two AI technologies, machine learning and natural language processing, fuel Hi Marley’s intelligent conversational platform, which West Bend Mutual Insurance piloted in claims with outstanding results. The Marley chatbot lets West Bend’s customers text back and forth to receive updates, ask and answer questions and submit photos. Its use of SMS messaging means that communication can be asynchronous and done on a customer’s own schedule, eliminating endless rounds of phone tag.

  • Natural language processing allows Marley to communicate with customers in plain English – both to understand their needs and to respond in a way that they will understand.
  • Machine learning enables Marley to continue to improve. The platform analyzes every conversation and uses it to shape how Marley responds to specific requests, refining its insurance-specific expertise for future interactions.

See also: Strategist’s Guide to Artificial Intelligence  

Natural language processing is also a critical tool for Cake Insure, a digital workers’ comp MGA with a focus on making the quoting experience easier for direct customers. One of the hurdles that would-be customers had to overcome in obtaining workers’ comp coverage was answering a multitude of questions regarding very specific information that a layperson is unlikely to know about or understand.

  • NAIC codes, for example, are required for every workers’ comp policy, but the average small business owner would be baffled if asked about them. Cake circumvents this by asking usera to type in descriptions of their companies in their own words. Natural language processing parses this plain-language description and searches for its approximate match in the NAIC data sets. This back-end process occurs without the user’s awareness and without exposing potentially confusing content.
  • As with Hi Marley’s chatbot functionality, natural language processing is paired with machine learning to improve its ability to respond to specific phrases and content.

Machine learning can also be deployed in conjunction with other AI technologies. Image analysis and computer vision are combined with machine learning in Cape Analytics’ solution, which can automatically identify properties seen in geospatial imagery and extract property attributes relevant to insurers. The result is a continually updated database of property attributes like roof condition and geometry, building footprint and nearby hazards.

  • Computer vision helps turn the unstructured data in photos and videos from drones, satellite and aerial imagery into structured data.
  • Machine learning allows the solution to train itself on how to do that more effectively, as well as higher-level analysis like developing a risk condition score for roofs.

We are only scratching the surface of how AI can be applied across the value chain. The incredible variety of AI’s potential applications in insurance is difficult to overstate. QBE knows that well: It won a company-wide SMA Innovation in Action Award for wide-ranging activities in emerging technologies and partnerships with insurtech startups, but AI in general, and machine learning specifically, are their top priorities. In addition to partnering with dozens of insurtechs, QBE has also pushed itself to deploy each insurtech’s technology somewhere within its business – meaning QBE has dozens of different creative AI applications in play at once. For example, in partnership with HyperScience, QBE is improving data capture from paper documents through machine learning and computer vision.

These winners’ stories demonstrate the myriad ways that insurers are applying AI to improve business operations. Notably, its deployment helps them to significantly improve the customer experience – or, in the case of data capture, the internal employee experience. The need for this kind of seamless customer experience in the digital world cannot be overemphasized. AI, which struck many as a science-fictional concept, has proven its real-world worth by enabling insurers to transform their customer journeys and experience.

With full-scale implementations popping up across the insurance industry, as well as the pilots and limited rollouts that we have seen in previous years, it is easy to lose sight of the fact that we are seeing only the very tip of the iceberg in terms of how AI can transform the business of insurance. Applications of more advanced and advancing AI technologies, as well as the combination of AI with emerging technologies such as drones, new user interaction technologies, autonomous vehicles and IoT, are unexplored territory that is bright with promise.

See also: 3 Steps to Demystify Artificial Intelligence  

This much is clear: AI will change the face of the insurance industry. In fact, it’s already happening.

For more information on the SMA Innovation in Action Awards program and this year’s winners, please click here.

To download a free copy of SMA’s white paper AI in P&C Insurance: Pragmatic Approaches for Today, Promise for Tomorrow, please click here.